Intrinsic value of Advantage Oil&Gas - AAV

Previous Close

$6.40

  Intrinsic Value

$1.19

stock screener

  Rating & Target

str. sell

-81%

  Value-price divergence*

-12%

Previous close

$6.40

 
Intrinsic value

$1.19

 
Up/down potential

-81%

 
Rating

str. sell

 
Value-price divergence*

-12%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AAV stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  23.40
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  116
  186
  287
  429
  622
  878
  1,207
  1,620
  2,127
  2,737
  3,457
  4,293
  5,249
  6,326
  7,527
  8,851
  10,295
  11,859
  13,540
  15,335
  17,241
  19,256
  21,377
  23,604
  25,935
  28,369
  30,908
  33,552
  36,302
  39,163
  42,135
Variable operating expenses, $m
 
  142
  220
  329
  477
  673
  926
  1,243
  1,631
  2,099
  2,652
  3,293
  4,026
  4,852
  5,773
  6,788
  7,896
  9,096
  10,385
  11,762
  13,224
  14,769
  16,396
  18,104
  19,892
  21,759
  23,706
  25,734
  27,844
  30,038
  32,318
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  131
  142
  220
  329
  477
  673
  926
  1,243
  1,631
  2,099
  2,652
  3,293
  4,026
  4,852
  5,773
  6,788
  7,896
  9,096
  10,385
  11,762
  13,224
  14,769
  16,396
  18,104
  19,892
  21,759
  23,706
  25,734
  27,844
  30,038
  32,318
Operating income, $m
  -15
  43
  67
  100
  145
  205
  281
  377
  496
  638
  806
  1,000
  1,223
  1,474
  1,754
  2,062
  2,399
  2,763
  3,155
  3,573
  4,017
  4,487
  4,981
  5,500
  6,043
  6,610
  7,202
  7,818
  8,458
  9,125
  9,817
EBITDA, $m
  71
  181
  279
  417
  605
  854
  1,174
  1,576
  2,069
  2,662
  3,363
  4,176
  5,105
  6,153
  7,321
  8,609
  10,014
  11,535
  13,170
  14,916
  16,770
  18,730
  20,793
  22,959
  25,226
  27,594
  30,064
  32,635
  35,311
  38,093
  40,984
Interest expense (income), $m
  7
  5
  10
  18
  30
  45
  65
  91
  124
  164
  212
  269
  335
  410
  496
  591
  695
  809
  933
  1,066
  1,208
  1,358
  1,518
  1,685
  1,861
  2,046
  2,238
  2,439
  2,648
  2,865
  3,091
Earnings before tax, $m
  -15
  38
  56
  82
  115
  160
  216
  286
  372
  474
  594
  731
  888
  1,064
  1,258
  1,472
  1,704
  1,954
  2,222
  2,507
  2,809
  3,128
  3,463
  3,814
  4,182
  4,565
  4,964
  5,379
  5,811
  6,260
  6,727
Tax expense, $m
  -3
  10
  15
  22
  31
  43
  58
  77
  100
  128
  160
  197
  240
  287
  340
  397
  460
  528
  600
  677
  759
  845
  935
  1,030
  1,129
  1,232
  1,340
  1,452
  1,569
  1,690
  1,816
Net income, $m
  -12
  28
  41
  60
  84
  117
  158
  209
  272
  346
  433
  534
  648
  776
  918
  1,074
  1,244
  1,426
  1,622
  1,830
  2,051
  2,284
  2,528
  2,785
  3,053
  3,332
  3,623
  3,927
  4,242
  4,570
  4,910

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,108
  1,768
  2,731
  4,084
  5,926
  8,361
  11,494
  15,428
  20,258
  26,067
  32,925
  40,886
  49,987
  60,251
  71,686
  84,291
  98,050
  112,946
  128,953
  146,046
  164,199
  183,388
  203,594
  224,801
  246,999
  270,185
  294,362
  319,541
  345,738
  372,976
  401,287
Adjusted assets (=assets-cash), $m
  1,108
  1,768
  2,731
  4,084
  5,926
  8,361
  11,494
  15,428
  20,258
  26,067
  32,925
  40,886
  49,987
  60,251
  71,686
  84,291
  98,050
  112,946
  128,953
  146,046
  164,199
  183,388
  203,594
  224,801
  246,999
  270,185
  294,362
  319,541
  345,738
  372,976
  401,287
Revenue / Adjusted assets
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
  0.105
Average production assets, $m
  1,073
  1,716
  2,651
  3,965
  5,753
  8,117
  11,159
  14,978
  19,667
  25,307
  31,965
  39,693
  48,529
  58,493
  69,595
  81,832
  95,190
  109,651
  125,191
  141,786
  159,409
  178,039
  197,655
  218,243
  239,794
  262,304
  285,776
  310,220
  335,653
  362,097
  389,582
Working capital, $m
  -15
  -24
  -37
  -55
  -80
  -113
  -156
  -209
  -274
  -353
  -446
  -554
  -677
  -816
  -971
  -1,142
  -1,328
  -1,530
  -1,747
  -1,978
  -2,224
  -2,484
  -2,758
  -3,045
  -3,346
  -3,660
  -3,987
  -4,328
  -4,683
  -5,052
  -5,435
Total debt, $m
  113
  240
  426
  687
  1,043
  1,513
  2,117
  2,877
  3,809
  4,930
  6,254
  7,790
  9,546
  11,527
  13,734
  16,167
  18,823
  21,697
  24,787
  28,086
  31,589
  35,293
  39,193
  43,286
  47,570
  52,045
  56,711
  61,570
  66,626
  71,883
  77,347
Total liabilities, $m
  213
  341
  527
  788
  1,144
  1,614
  2,218
  2,978
  3,910
  5,031
  6,355
  7,891
  9,647
  11,628
  13,835
  16,268
  18,924
  21,798
  24,888
  28,187
  31,690
  35,394
  39,294
  43,387
  47,671
  52,146
  56,812
  61,671
  66,727
  71,984
  77,448
Total equity, $m
  894
  1,426
  2,204
  3,296
  4,782
  6,747
  9,276
  12,451
  16,348
  21,036
  26,571
  32,995
  40,339
  48,622
  57,851
  68,022
  79,126
  91,147
  104,065
  117,859
  132,508
  147,994
  164,300
  181,414
  199,328
  218,039
  237,551
  257,870
  279,010
  300,992
  323,839
Total liabilities and equity, $m
  1,107
  1,767
  2,731
  4,084
  5,926
  8,361
  11,494
  15,429
  20,258
  26,067
  32,926
  40,886
  49,986
  60,250
  71,686
  84,290
  98,050
  112,945
  128,953
  146,046
  164,198
  183,388
  203,594
  224,801
  246,999
  270,185
  294,363
  319,541
  345,737
  372,976
  401,287
Debt-to-equity ratio
  0.126
  0.170
  0.190
  0.210
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
Adjusted equity ratio
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807
  0.807

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -12
  28
  41
  60
  84
  117
  158
  209
  272
  346
  433
  534
  648
  776
  918
  1,074
  1,244
  1,426
  1,622
  1,830
  2,051
  2,284
  2,528
  2,785
  3,053
  3,332
  3,623
  3,927
  4,242
  4,570
  4,910
Depreciation, amort., depletion, $m
  86
  137
  212
  317
  460
  649
  893
  1,198
  1,573
  2,025
  2,557
  3,175
  3,882
  4,679
  5,568
  6,547
  7,615
  8,772
  10,015
  11,343
  12,753
  14,243
  15,812
  17,459
  19,184
  20,984
  22,862
  24,818
  26,852
  28,968
  31,167
Funds from operations, $m
  129
  165
  253
  377
  545
  766
  1,050
  1,407
  1,845
  2,371
  2,990
  3,709
  4,530
  5,456
  6,486
  7,621
  8,859
  10,198
  11,637
  13,173
  14,804
  16,527
  18,341
  20,244
  22,236
  24,316
  26,486
  28,744
  31,094
  33,537
  36,077
Change in working capital, $m
  0
  -9
  -13
  -18
  -25
  -33
  -42
  -53
  -65
  -79
  -93
  -108
  -123
  -139
  -155
  -171
  -186
  -202
  -217
  -232
  -246
  -260
  -274
  -287
  -301
  -314
  -327
  -341
  -355
  -369
  -383
Cash from operations, $m
  129
  174
  266
  395
  569
  799
  1,093
  1,461
  1,910
  2,449
  3,083
  3,817
  4,654
  5,595
  6,641
  7,792
  9,045
  10,400
  11,854
  13,405
  15,049
  16,787
  18,614
  20,531
  22,537
  24,631
  26,813
  29,085
  31,449
  33,906
  36,460
Maintenance CAPEX, $m
  0
  -86
  -137
  -212
  -317
  -460
  -649
  -893
  -1,198
  -1,573
  -2,025
  -2,557
  -3,175
  -3,882
  -4,679
  -5,568
  -6,547
  -7,615
  -8,772
  -10,015
  -11,343
  -12,753
  -14,243
  -15,812
  -17,459
  -19,184
  -20,984
  -22,862
  -24,818
  -26,852
  -28,968
New CAPEX, $m
  -94
  -644
  -935
  -1,314
  -1,788
  -2,364
  -3,042
  -3,820
  -4,689
  -5,640
  -6,658
  -7,728
  -8,836
  -9,965
  -11,102
  -12,236
  -13,358
  -14,461
  -15,540
  -16,594
  -17,623
  -18,630
  -19,616
  -20,588
  -21,551
  -22,510
  -23,472
  -24,444
  -25,433
  -26,444
  -27,485
Cash from investing activities, $m
  -94
  -730
  -1,072
  -1,526
  -2,105
  -2,824
  -3,691
  -4,713
  -5,887
  -7,213
  -8,683
  -10,285
  -12,011
  -13,847
  -15,781
  -17,804
  -19,905
  -22,076
  -24,312
  -26,609
  -28,966
  -31,383
  -33,859
  -36,400
  -39,010
  -41,694
  -44,456
  -47,306
  -50,251
  -53,296
  -56,453
Free cash flow, $m
  35
  -555
  -806
  -1,131
  -1,536
  -2,025
  -2,598
  -3,252
  -3,977
  -4,764
  -5,599
  -6,468
  -7,357
  -8,252
  -9,141
  -10,013
  -10,860
  -11,676
  -12,458
  -13,205
  -13,917
  -14,596
  -15,245
  -15,869
  -16,473
  -17,063
  -17,643
  -18,221
  -18,801
  -19,390
  -19,993
Issuance/(repayment) of debt, $m
  -29
  127
  186
  261
  355
  470
  605
  759
  932
  1,121
  1,324
  1,536
  1,756
  1,981
  2,207
  2,433
  2,656
  2,875
  3,089
  3,299
  3,504
  3,704
  3,900
  4,093
  4,284
  4,475
  4,666
  4,859
  5,056
  5,257
  5,464
Issuance/(repurchase) of shares, $m
  0
  504
  736
  1,032
  1,402
  1,848
  2,371
  2,966
  3,626
  4,342
  5,101
  5,890
  6,696
  7,507
  8,310
  9,097
  9,860
  10,594
  11,296
  11,964
  12,599
  13,202
  13,778
  14,329
  14,861
  15,379
  15,888
  16,392
  16,899
  17,412
  17,937
Cash from financing (excl. dividends), $m  
  -35
  631
  922
  1,293
  1,757
  2,318
  2,976
  3,725
  4,558
  5,463
  6,425
  7,426
  8,452
  9,488
  10,517
  11,530
  12,516
  13,469
  14,385
  15,263
  16,103
  16,906
  17,678
  18,422
  19,145
  19,854
  20,554
  21,251
  21,955
  22,669
  23,401
Total cash flow (excl. dividends), $m
  0
  77
  116
  163
  222
  293
  377
  474
  581
  699
  826
  958
  1,096
  1,236
  1,377
  1,517
  1,656
  1,793
  1,927
  2,058
  2,185
  2,310
  2,432
  2,553
  2,672
  2,791
  2,911
  3,031
  3,154
  3,279
  3,408
Retained Cash Flow (-), $m
  -64
  -532
  -777
  -1,092
  -1,486
  -1,965
  -2,529
  -3,175
  -3,898
  -4,688
  -5,534
  -6,424
  -7,344
  -8,283
  -9,229
  -10,171
  -11,104
  -12,021
  -12,918
  -13,794
  -14,649
  -15,486
  -16,306
  -17,114
  -17,914
  -18,711
  -19,511
  -20,319
  -21,141
  -21,982
  -22,847
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -456
  -661
  -929
  -1,265
  -1,672
  -2,151
  -2,701
  -3,316
  -3,989
  -4,709
  -5,466
  -6,249
  -7,048
  -7,852
  -8,654
  -9,448
  -10,227
  -10,991
  -11,736
  -12,464
  -13,176
  -13,874
  -14,561
  -15,242
  -15,920
  -16,601
  -17,288
  -17,987
  -18,703
  -19,439
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -437
  -606
  -809
  -1,041
  -1,296
  -1,561
  -1,825
  -2,073
  -2,291
  -2,469
  -2,596
  -2,667
  -2,680
  -2,636
  -2,541
  -2,401
  -2,225
  -2,024
  -1,807
  -1,584
  -1,363
  -1,151
  -954
  -776
  -619
  -484
  -371
  -278
  -204
  -146
Current shareholders' claim on cash, %
  100
  70.4
  50.9
  37.7
  28.6
  22.2
  17.6
  14.2
  11.7
  9.8
  8.3
  7.1
  6.2
  5.4
  4.8
  4.3
  3.9
  3.5
  3.2
  3.0
  2.8
  2.6
  2.4
  2.3
  2.1
  2.0
  1.9
  1.8
  1.7
  1.7
  1.6

Advantage Oil & Gas Ltd. is an intermediate natural gas and liquids development and production company. The Company is engaged in the business of natural gas exploitation, development, acquisition and production in the Province of Alberta. The Company focuses on the development of Montney resource play at Glacier, Alberta in Western Canada. The Company has drilled over 10 Montney gas wells. The Glacier property lies along the Alberta side of the border with British Columbia between Grande Prairie, Alberta and Dawson Creek, British Columbia. The primary zones of interest are within the Triassic Montney and Doig formation siltstones. The Glacier property consists of over 90 net sections of land with Doig/Montney interests. It owns and operates a gas plant located at 5-02-76-12W6. It also holds interest in approximately 20 additional sections of Doig/Montney land rights in the Glacier, Valhalla and Wembley area proximal to its existing land holdings.

FINANCIAL RATIOS  of  Advantage Oil&Gas (AAV)

Valuation Ratios
P/E Ratio -98.5
Price to Sales 10.2
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 33.8
Growth Rates
Sales Growth Rate 23.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.8%
Cap. Spend. - 3 Yr. Gr. Rate -2.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 12.6%
Total Debt to Equity 12.6%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. 1%
Return On Total Capital -1.2%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity -1.4%
Return On Equity - 3 Yr. Avg. 0.7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 87.1%
Gross Margin - 3 Yr. Avg. 88.3%
EBITDA Margin 67.2%
EBITDA Margin - 3 Yr. Avg. 88.9%
Operating Margin -12.9%
Oper. Margin - 3 Yr. Avg. 20.6%
Pre-Tax Margin -12.9%
Pre-Tax Margin - 3 Yr. Avg. 20.6%
Net Profit Margin -10.3%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 20%
Eff/ Tax Rate - 3 Yr. Avg. 25.6%
Payout Ratio 0%

AAV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AAV stock intrinsic value calculation we used $116 million for the last fiscal year's total revenue generated by Advantage Oil&Gas. The default revenue input number comes from 2016 income statement of Advantage Oil&Gas. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AAV stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AAV is calculated based on our internal credit rating of Advantage Oil&Gas, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Advantage Oil&Gas.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AAV stock the variable cost ratio is equal to 76.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AAV stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.3% for Advantage Oil&Gas.

Corporate tax rate of 27% is the nominal tax rate for Advantage Oil&Gas. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AAV stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AAV are equal to 924.6%.

Life of production assets of 12.5 years is the average useful life of capital assets used in Advantage Oil&Gas operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AAV is equal to -12.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $894 million for Advantage Oil&Gas - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 187.597 million for Advantage Oil&Gas is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Advantage Oil&Gas at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Advantage Oil & Gas posts 2Q profit   [Aug-05-17 01:09AM  Associated Press]
▶ Advantage Oil & Gas reports 4Q loss   [Mar-03-17 05:00AM  Associated Press]
▶ Advantage Announces 2016 Year-End Reserves   [Feb-07-17 09:28PM  PR Newswire]
▶ Advantage Announces 2017 Budget and Development Plan   [Nov-28-16 08:24PM  PR Newswire]
▶ Advantage Announces Third Quarter 2016 Results   [Nov-03-16 05:55PM  PR Newswire]
▶ Advantage Provides Q3 2016 Operational Update   [Oct-12-16 10:05PM  PR Newswire]
▶ LNG Approval Is Not Too Late: Advantage Oil & Gas CEO   [Sep-28-16 05:37PM  at Bloomberg]
▶ Advantage Announces Second Quarter 2016 Results   [Aug-04-16 08:54PM  PR Newswire]
▶ [$$] Thailands Duty-Free King Buys Controlling Stake in Thai AirAsia   [Jun-15-16 12:27AM  at The Wall Street Journal]
▶ [$$] Thailand's Duty-Free King Buys Controlling Stake in Thai AirAsia   [Jun-14-16 05:34PM  at The Wall Street Journal]
▶ Advantage Announces First Quarter 2016 Results   [May-05-16 07:56PM  PR Newswire]
▶ Advantage Announces Closing of Equity Financing   [Mar-08-16 08:27AM  CNW Group]
▶ Advantage Announces 2015 Year-End Reserves   [Feb-16-16 06:00AM  PR Newswire]
▶ Is Globe Specialty Metals, Inc. (GSM) A Good Stock To Buy?   [Dec-02  08:44AM  at Insider Monkey]
▶ Is Astronics Corporation (ATRO) A Good Stock To Buy?   [Nov-26  02:44AM  at Insider Monkey]
▶ Advantage Announces Third Quarter 2015 Results   [Nov-05  08:42PM  PR Newswire]
Financial statements of AAV
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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